Microeconomics
2nd Edition
ISBN: 9781259813337
Author: KARLAN, Dean S., Morduch, Jonathan
Publisher: Mcgraw-hill Education,
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Question
Chapter 2, Problem 15PA
To determine
(a)
Production possibilities frontier for each country.
To determine
(b)
Point A on each production possibilities frontier when both countries produce 2 million cars each.
To determine
(c)
Country that specializes in producing cars.
To determine
(d)
New consumption point B for each country after trade.
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Draw two Linear Production Possibilities Curves for two countries: Portugal and England and two products :Wine (kegs) and Cloth (Sheets). On Portugal's graph show the maximum production per worker of cloth sheets of 100 units on the Y axis. On the X axis show the maximum production of Wine at 150 kegs. For England's graph show the outputs at 90 cloth sheets on the Y axis and 60 Wine kegs on the X axis
Suppose County A and B produce only paper and cars. Country A can produce 8 tons of paper or 4 million cars yearly. Country B can produce 25 tons of paper or 5 million cars yearly.
Draw the production possibilities frontier for each country.
2. Both countries want 2 million cars each year and as much paper as they can produce along with 2 million cars. Find this point on each production possibilities frontier and label it “X1.”
3. Suppose the countries specialize. Which country will produce cars
4. Once they specialize, suppose they work out a trade of 2 million cars for 6 tons of paper. Find the new consumption point for each country and label it “X2.”
The figure below depicts the production possibilities
curve (PPC) of a country. It also depicts the
consumption possibilities curve (CPC) when the country
is engaged in trade with one other country. Point C is
this country's consumption when that trade occurs.
Quantity of 350
good y
300
250
200
150
100
50
0
0
20
40
19
C
60
80
100
120
Quantity of good x
Calculate how much this country trades with the other
country in good y when the two countries engage in
free trade. Enter a whole number only. Enter a positive
number if this country exports good y, and a negative
number if it imports it. Enter O if the answer cannot be
obtained with the information given. Since this is a
graphical question, approximate answers (within 20 of
the exact answer) are accepted. Hint: consider how
much the country produces and consumes this good.
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